Germany’s Machinery Industry Faces Fourth Consecutive Year of Decline

Berlin, September Germany’s machinery and equipment industry is expected to record its fourth consecutive year of declining production in 2026, according to the German Engineering Federation (VDMA), highlighting continuing challenges for one of the country’s key industrial sectors.

The VDMA has revised its 2026 production forecast downward and now expects real output in the machinery sector to fall by approximately 2%. Earlier projections had pointed toward stagnation rather than another contraction.

The downgrade follows a 4.1% decline in production during the first seven months of 2026 compared with the same period last year. Despite the weak production figures, however, there are signs that demand is beginning to improve.

Price-adjusted orders increased by around 5% during the first seven months, with demand from countries outside the euro zone rising particularly strongly. Orders from those markets were up approximately 14%, providing some support for German manufacturers.

The machinery industry is an important part of Germany’s manufacturing base and includes companies producing industrial equipment, machinery, automation systems and other technologies used by businesses around the world.

The latest figures suggest that stronger orders have not yet translated into an equivalent recovery in production. Weak domestic demand and an uneven economic recovery continue to limit the industry’s short-term performance.

There is nevertheless a more positive outlook for 2027. The VDMA expects real machinery production to grow by approximately 3% next year, assuming the improvement in orders continues and manufacturers begin converting stronger demand into higher output.

Germany’s broader economy has also been dealing with prolonged industrial weakness, particularly in manufacturing and export-oriented sectors. The machinery industry’s performance is therefore being closely watched as an indicator of whether Germany’s industrial base can begin a sustained recovery.

VDMA chief economist Johannes Gernandt said the improved order situation and somewhat brighter business expectations suggest that production could return to growth next year.

For German manufacturers, the immediate challenge is turning the recent improvement in incoming orders into actual production growth while dealing with weak domestic demand and continuing uncertainty in international markets.

The latest forecast does not indicate an immediate turnaround in 2026, but the projected 2027 recovery could mark an important shift if stronger orders continue.